Abolishing IHT would be a massive blow for the AIM market in the short term, however AIM is not just a “tax dodge” market, it also attracts money from individuals and fund managers based on its investment potential.
The Wealth Club believes that dedicated IHT products account for a relatively small proportion of the overall AIM market, less than the 30% suggested by some sources.
Moreover, given the cost of abolishing IHT we believe the government is highly unlikely to get rid of it completely, instead implementing smaller tweaks to the rules, such as adding tiers or raising nil-rate bands. This would be more easily digested by the market.
Nicholas Hyett, Investment Manager at Wealth Club said, “Abolishing IHT would be bad news for AIM. There is billions of pounds invested in specialist AIM products precisely because of its potential to mitigate IHT bills.
“Withdrawing that relief would inevitably hit company valuations and has the potential to create serious market disruption.
“That said AIM is far more than being just a tax dodge. It includes some great companies and billions are invested into the market by fund managers who do not benefit from the inheritance tax relief.
“In our view it is highly unlikely the government will actually abolish IHT. It’s simply too much of a cash cow. Our estimates suggest the government’s tax-take from IHT could reach £9bn by the end of the decade. That’s not to say cuts and tweaks won’t be made.
“Of course one of the purposes for IHT relief on AIM is to encourage investment into smaller fast growing companies which in turn creates lots of jobs and economic growth.
“Radical moves that put that at risk would fly in the face of the government’s wider policy to support smaller company investment so we suspect an alternative carrot to get people to invest in these companies would need to be found.”